From BMW to Volvo, carmakers drive supply chain sustainability

From BMW to Volvo, carmakers drive supply chain sustainability

More than a dozen of the world’s largest carmakers have agreed on minimum human rights, environmental and business ethics standards for their global supply chains, according to corporate responsibility trade associations the Automotive Industry Action Group (AIAG) in Michigan and CSR Europe in Brussels, which today jointly announced the “unprecedented agreement.”

“People and the environment are the automotive industry’s most important resources. For this reason, we are working together to attain the highest standard in business integrity and in the social and environmental performance of our supply chain,” explains the agreement.

While some of these manufacturers have their own standards, codes and policies that supersede the new agreement, “we believe in the benefits of a common approach and message,” states the document, which describes minimum expectations for direct suppliers and their subcontractors.

“We expect that suppliers will uphold these standards and cascade them down their supply chain,” according to the guidelines, which are based on “fundamental principles of social and environmental responsibility that are compliant with local law [and] consistent with international expectations.”

The agreement calls on the manufacturers to pursue comprehensive strategies to reduce the lifecycle environmental footprint of all supply chain products and materials. Suggested measures include reducing greenhouse gas emissions, cutting energy use and water consumption, boosting renewable energy use and improving waste management.

Additionally, the guidelines set minimum standards on business ethics, working conditions and human rights that comply with applicable local laws. These include a no-tolerance policy on child labor, forced labor, human trafficking, harassment and discrimination.

Human rights became a particularly serious concern for automakers after Bloomberg in a lengthy November 2006 exposé described how products of slave labor in Latin America – primarily pig iron made with charcoal produced in the Brazilian Amazon – were making their way into vehicles produced in the U.S. by Ford, GM, Nissan and Toyota through their steel suppliers.

This led to internal company probes and canceled contracts, but also admissions by automakers that they have difficulty monitoring the raw materials and parts purchased by their suppliers and subcontractors of those suppliers.

In an interview with GreenBiz, Tanya Bolden, AIAG’s corporate responsibility program development manager, said the common guidelines, which have been evolving since 2009, are not a reaction to news reports about “the secret world of modern slavery.”

However, the Bloomberg story in particular was “a catalyst,” said Bolden. “What a story like this does is point to the potential for risks in the supply chain. All potential customers care about this."

AIAG has held on-site trainings for carmakers on business ethics, working conditions and environmental responsibility in Argentina, Brazil, China, Russia, South Africa, Thailand and Turkey.

“This is a helpful starting point to give direction to the supply base,” said Bolden. “Local law is going to vary, as will enforcement. So the industry felt the need to come out and make a statement on expectations.”